# l 2 ]'. GUNTUR MUNICIPAL COUNCIL v. GUNTUR TOWN RATE PAYERS' ASSOCIATI01' September l 8, l 970

- **Citation:** [1971] 2 S.C.R. 423
- **Court:** Supreme Court of India
- **Decided:** 1971
- **Case number:** Civil Appeals Nos. 1650 to 1652 of 1966
- **Bench:** J. C. Shah, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/l-2-guntur-municipal-council-v-guntur-town-rate-payers-associati01-september-l-5134
- **Pages:** 4

## Headnote

Madru.1· District Municipalities Act (5 of 1920). s. 82(2) Rew ,11
whic:h buildings nray reasonahly be expected to be let /ro111
111ontl1
ro
ntontli-How dctcnnined.
The appellant Municipal Council effected (a general revision of the
rental values of houses and buildings in the municipality, under s. 82(2)
of the Madras District Municipalities Act, 1920. for
the
purpose
ol
assessment of tax.
On the question whether the appellant was bound to make the asse-sment in the light of the provisioos of the Rent Control Act,
HELD : (a) Under s. 82(2) the test is what rent the premises can
lawfully fetch if let out to a hypothetical tenant. The municipality is
not free to assess any arbitrary annual value
but has to look to and
is lioun<l by the fair or the standard rent which would be payable for
particular premises under the Rent Control Act in force during the year
of assessment.
(425 A-Bl
Corpomtion of CalrnttCI v. S111. P"'/111a De.hi & Ors., I 1962] 3 S.C.R. 49.
followed.
(b) No distinction can be made between buildings the fair rent of
which has been actually fixed by the Controller and· those in respect of
wllich no such rent has been fixed.
Where the Controller has not fixed
the fair rent the municipal authorities will have to arrive at the fair
rent according to the principles laid down in s. 4 of the Rent Control
Act for the determination of fair rent. (425 F-0]
(cJ Under the rules contained in the Fourth Schedule to the Muni·
cipalities Act, the assessment books have to be revised once in every
5 years and the quinquennial assessment thus made enures for that
period.
But a procedure has been prescribed in the rules for changing
the assessntent whenever a case is made out for doing so. Therefore.
the assessment of valuation for the purpose of tax must be
made
in
<1Ccord•nce with and in the light of the provisions of the Rent Control
Act which would
be
in
force
during
the
period of assessment.
[426 B-C]

## Text

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-l 2 ]'.
GUNTUR MUNICIPAL COUNCIL
v.
GUNTUR TOWN RATE PAYERS' ASSOCIATI01'
September l 8, l 970
[J. C. SHAH AND A. N. GROVER, JJ.]
Madru.1· District Municipalities Act (5 of 1920). s. 82(2) Rew ,11
whic:h buildings nray reasonahly be expected to be let /ro111
111ontl1
ro
ntontli-How dctcnnined.
The appellant Municipal Council effected (a general revision of the
rental values of houses and buildings in the municipality, under s. 82(2)
of the Madras District Municipalities Act, 1920. for
the
purpose
ol
assessment of tax.
On the question whether the appellant was bound to make the asse-sment in the light of the provisioos of the Rent Control Act,
HELD : (a) Under s. 82(2) the test is what rent the premises can
lawfully fetch if let out to a hypothetical tenant. The municipality is
not free to assess any arbitrary annual value
but has to look to and
is lioun<l by the fair or the standard rent which would be payable for
particular premises under the Rent Control Act in force during the year
of assessment.
(425 A-Bl
Corpomtion of CalrnttCI v. S111. P"'/111a De.hi & Ors., I 1962] 3 S.C.R. 49.
followed.
(b) No distinction can be made between buildings the fair rent of
which has been actually fixed by the Controller and· those in respect of
wllich no such rent has been fixed.
Where the Controller has not fixed
the fair rent the municipal authorities will have to arrive at the fair
rent according to the principles laid down in s. 4 of the Rent Control
Act for the determination of fair rent. (425 F-0]
(cJ Under the rules contained in the Fourth Schedule to the Muni·
cipalities Act, the assessment books have to be revised once in every
5 years and the quinquennial assessment thus made enures for that
period.
But a procedure has been prescribed in the rules for changing
the assessntent whenever a case is made out for doing so. Therefore.
the assessment of valuation for the purpose of tax must be
made
in
<1Ccord•nce with and in the light of the provisions of the Rent Control
Act which would
be
in
force
during
the
period of assessment.
[426 B-C]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1650
to 1652 of 1966.
Appeals by special leave from the judgment and decree dated
December 3, 1965 of the Andhra Pradesh High Court in Secona
Appeals Nos. 367, 368 and 369 of 1962.
B. V. Subrahmanyam and A. V. Rangam, for the appellant
H
(in ~II the appeals).
M. Natesan and K. Jayaram, for the respondents (in all the
appeals).
424
SUPREME COURT REPORTS
[1971] 2 S.C.R'.
The Judgment of the Coun was delivered by
Gronr, J. These apj!Cllis have bee;1 brought by special leave
from a judgment of the Andhra Pradesh High Coun.
Three suits, namely, 0.S. Nos. 222, 223 and 466 of 1960
were filed in the Guntur coun in which the relief claimed was
for a declaration ·that the general revision of the rental values of
the houses and buildings effected by the Guntur Municipality in
the year 1960 for the purpose of assessment of tax was ultra vires
and illegal and for a consequential relief of a permanent injunction restrainin~ the municipality from acting on the special notices
issued to the tax payers.
Section 81 of the Madras District Municipalites Act 1920,
hereinafter called the "Municipalities Act" gives the description
and classes Of property tax and other taxes leviable by the municipality. Section 82 gives the method of assessment. It is provided by sub-s. ( 2) of that section that the annual value of lands and
buildings shall be deemed to be the gross annual rent at which
they may reasonably be expected to be let from month to month or
from year to year less certain deductions. The District Munsif by
a common judgment delivered in the three suits held that the
annual value had to ~ computed in the context of the rent that
was payable under the Rent Control legislation. The suits were
decreed and a declaration was granted that the general revision
made by the Guntur Municipality in 1960 by increasing the
rental value of houses to more than the rental value which prevailed on the dates provided in the Rent Control Acts in rorce
prior to 1 %0 was ultra vires and illegal and permanent injunctions were granted restraining the municipality from acting upon
the special demand notices issued to the rate-payers and from
collecting the enhanced tax.
Appeals were filed and the first
appellate court substantially upheld the judgment of the
trial
court though certain modifications were made in the decrees
passed by that court. Appeals were taken to the High Court but
the same were dismissed.
The only point which we are called upon to decide is whether
before the fixation of a fair rent of any premises the municipality
was bound to make assessment in. the light of the provisions contained in the Rent Acts.
A subsidiary question has also ari~
whether the courts below were justified in referring to and passmg
the decrees keeping in view the Rent Acts which "111'.er~ in force
prior to the enactment of the Andhra Pradesh Buildings (~~
Rent and Eviction) Control Act, 1960, hereafter called the Act
Now s. 82(2) of the Municipalites Act, as stated. before, makes
provision for the fixation of annual value accordmg to the rent
at which lands and buildings may reasonably be 11Xpectcd to be
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•GUNTUR MUNIC COUNCIL v. RATE PAYER ASSN. (Grover, J.) 425
let fro1:11 month tu month <;>r fr<~m year to year less the specified
deduction. The test essentially 1s what rent the premises can !awfully fetch if let out to a hypothetical tenant. The municipality
is thus not free to assess any arbitrary annual value and has to
look to and is bound by the fair or the standard rent which would
be payable for a particular premises under the Rent Act in
force during the year of assessment.
In The Corporation of
Calcutta v. Sm. Padma Debi & Ors.(') it was held that on a.
fair reading of the express provisions of s.
127(a)
of the
Calcutta Municipal Act 1923 the annual rent could not be fixed
higher than the standard rent under the Rent Control Act. There
the Rent Control Act of 1950 came into force before the assessment was finally determined and it was observed that the Cori»
ration had no power to fix the annual valuation of the premises
higher than the standard rent under that Act. The learned
counsel for the appellant has not made any attempt nor indeed
he could do so to contest the above view. What has been stressed
by him is that s. 7 of the Act makes it clear that it is only a!ter
the fixation of the fair rent of a building that the landlord is
debarred from claiming or receiving the payment of any amount
in excess of such fair rent. It is urged that so long as the fair rent
ol a building or premises is not fixed the assessment of valuation
by a municipality need not be limited or governed by the measure
provided by the provisions of the Act for determination of fair
rent.
Logically such buildings or premises as are not let out to
a tenant and are in the self occupation of the landlords would also
fall within the same principle if no fair rent has even been fixed
m respect of them.
We are unable to agree that on the language of s. 82(2) of
the Municipalities Act any distinction can be made between
buildings the fair rent of which has been actually fixed by the
Controller and those in respect of which no such rent has been
fixed. It is perfectly clear that the landlord cannot lawfully expect
to get more rent than the fair rent which is payable in accordance
with the principles laid down in the Act. The assessment of valuation must take into account the measure of fair rent as determinable under the Act. It may be that where the Controller has not
fixed the fair rent the municipal authorities will have to arrive at
their own figurt of fair rent but that can be done without- any
difficulty by keeping in view the principles laid down in s. 4 of the
Act for determination of fair rent. This would of course be wit.Ii
regard to the assessment of valuation for the period subsequent
to the coming into force of the Act. For the prior period it would
be the Rent Act in force during the year of assessment in the light
;I) [l%2] 3 s. C.R. 49.
426
SUPREME COURT REPORTS
(1971] 2 S.C.R
of the provisions of which the figure of the fair rent would have
to be determined and assessment made accordingly.
There is a good deal of confusion in the judgments of the trial
court and the first appellate court with regard to the Rent Acts the
provisions of which wuuld have to be kept in view for the assessment of valuation for the purpose of s. 82{2) of the Municipalities
Act. The decrees which have been granted suffer from the same
infirmity. It has been pointed out by the learned counsel for the
respondents that .according to the rules contained in the fourth
schedule to the Municipalites Act the assessment books have to be
revised once in every five years and the quinquennial assessment
thus made enures for that period. But it appears from the rules
that a procedure has been prescribed for changing the assessment
whenever a case· is made out for doing so. We are not concerned
with the procedural difficulties which may be experienced; we have
to declare what the Jaw is and as appears to be well settled the
assesment of valuation for the purpose of tax must be made in
accordance with and in the light of the provisions of the Rent Act
which would be in force during the period of assessment. .
ln the result the decrees which have been granted are hereby
modified by declaring that the general revision made by the Guntur
Municipality by increasing the rental valuation of houses and
buildings beyond the fair rent determinable under the Rent Act
in force for the period of assessment shall be illegal and ultra vires
and a permanent injunction shall issue restraining the municipality
from realizing any amount in excess of such tax which may be
found due on t.'ie valuation fixed according to the principles laid
down in our judgment. In view of the entire circum~tan.:es the
. parties are left to bear their own costs in this Court.
V.P.S.
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